I thank members for their engagement and the questions they posed. I will deal first with the private sector related issues and the agenda of the private sector, for example, in attending the International Finance Corporation, IFC, meeting today and deciding what their interest may be in investing through the IFC in developing countries. The private sector will do what it wishes in any case. The question for Ireland, in terms of our development co-operation policy, is what the IFC should be doing as an important arm of the World Bank Group which is, ultimately, an international development institution whose mandate is to reduce poverty in southern countries. That is the first issue that must be kept on the agenda first and foremost.
Already, there are two serious concerns among civil society organisations in countries of the global South about IFC operations, the first of which is in terms of leveraging private sector investment, which is a way of topping up public finance to generate greater investment in developing countries. Our concerns are that the leveraging is targeting large multinational corporations and, through that, a number of issues arise. First, in a review of the European Investment Bank and the IFC sampling a number of companies, only 25% of all the companies supported by those institutions were domiciled in low-income countries. A key concern is that the money is going in the wrong direction. Second, a new strong trend is the use by international financial institutions of financial intermediaries to pass money to a middle private sector company. That becomes extremely difficult to track as to what happens after the money leaves that institution and what the development outcomes are in that regard.
Third, there is the question of procurement, which I know is on the agenda at the IFC meeting in Dublin today. What is important to acknowledge is that procurement in itself is a development activity. It can have a positive development outcome for countries in the global South if it benefits local industry well. There are clear assist procurement systems that have to be in place both among southern governments and within the development institutions giving aid to ensure that competitive prices are achieved and that there is no corruption. There is huge scope for much greater emphasis on targeted and country-tailored procurement policies.
As the Irish Government now appears to be indicating that it is encouraging the Irish private sector to engage more with the IFC, there are a number of questions that could be posed by the committee to the Department of Finance and Irish Aid in this regard. First, what does it see as the core development purpose of the IFC and does it believe that the IFC is delivering on its development mandate? Second, what does it see as the development purpose of international procurement policies? If Irish private sector companies are being encouraged to pursue procurement at the IFC, that would be a deviation from a sound development policy because in terms of our development co-operation policy Ireland should be pursuing as much benefit for southern countries from procurement systems of the World Bank and other development institutions.
On the other questions of taxation, multinational companies exist to make a profit but the crucial question is the illegal behaviour by multinational companies to achieve profits that are not rightfully theirs. It is estimated by Christian Aid that $160 billion per year is lost from southern countries as a result of tax evasion. That is through two particular forms of illegal practice - transfer mispricing, where goods are priced at a particular level to benefit the tax position of the companies involved, and falsifying invoices. These are illegal.
There is an important process going on at European Union level in that regard where EU directives on transparency and accounting are being reviewed. The Irish Government has supported country-by-country reporting for multinationals in that regard in respect of two extractive sectors. We welcome that. We also welcome that the Irish Government has supported project-by-project reporting because country-by-country level reporting from multinational companies often does not give enough information, in particular with regard to the extractives industry which is particularly prone to abuse by multinational companies.
This does not in any way undermine the purpose of a multinational company. There merely needs to be far greater transparency to ensure that the private sector is aware that citizens, governments and financial institutions are capable of investigating whether they are paying the right and just amount of tax in regard to the profits they are making.
Regarding the debt questions posed by a number of members, some practical questions were asked around who funds the debt cancellation agreements. That is a critical question. The reason debt cancellation agreements are contentious is because they cost money. In the last debt cancellation agreement, the multilateral debt relief initiative that was agreed after the G8 Gleneagles Summit in Scotland when the Drop the Debt campaign had a high profile, Ireland paid just under €60 million as its share towards that scheme, which was essentially a top-up of the existing debt cancellation schemes, termed the HIPC schemes or the HIPC initiative. That is the reason this issue is contentious. It is because the member countries of the World Bank and the IMF have financed the multilateral debt cancellation schemes. Other debt cancellations have been agreed, many of them bilaterally between governments and the countries that cannot pay them back. That is a cost that is taken on by the lending government. At World Bank and IMF level, which manages the current debt cancellation schemes of the HIPC and MDRI, the costs are based on the quota share and financial contributions of countries into the institutions. Obviously, the ones that pay the most are the ones that fund the most, in terms of the portions of debt cancellation. That said, the pursuit of increased debt cancellation for southern countries by the Irish Government would cost Ireland very little, given our quota share is so much lower than that of other countries in the institutions.
Another question that arose on the issue of debt concerns how debt justice organisations are organised around the world. We are very co-ordinated and networked with each other. Debt and Development Coalition Ireland is a member of the European Network on Debt and Development, which has over 50 members in Europe. We have counterparts in many countries of the European Union and we co-ordinate our positions closely with similar regional hubs in Africa, Asia and Latin America, the African Network on Debt and Development, the Latin American Network on Debt and Development and Jubilee South, which is a network across Africa, Asia and Latin America. The policy concerns I have outlined do not just come from Debt and Development Coalition Ireland. They arise from many democratic dialogues between up to hundreds of civil society organisations and these are the organisations on whose behalf we speak here today.
The issue of independent debt audits was raised. This is really a bottom up approach to try to achieve greater transparency with regard to the debt situation of southern countries. The lack of information flow is a significant problem, particularly with regard to external and domestic debts of southern countries. This is the reason debt audits are being pursued in Zimbabwe and it is on the cusp of deciding whether to partake in the HIPC debt cancellation scheme. If it partakes, it will have to start repaying much of its debt arrears. Zimbabwe has been in default for ten years because of its chaotic social and economic situation. Our counterpart organisation in Harare, the Zimbabwean Coalition on Debt and Development, is calling for independent parliamentary debt audit so that citizens and parliamentarians in Zimbabwe can examine the contracts and evaluation documents regarding the loans that have been given to Zimbabwe, whose debt is currently over €7 billion. Other independent audits have been pursued in many other southern countries, including the Philippines and Brazil. A government-led debt audit was carried out in Ecuador in recent years and this resulted in a commission being set up which reviewed the debt documentation relating to 30 years of Ecuador's debt. This resulted in the Ecuador Government taking strong steps and deciding not to repay certain bond payments it believed had been unfairly restructured.
Senator Norris proposed an international, economic, financial crimes court. There is a huge gap in our international architecture with regard to holding individuals and institutions to account for reckless financial endeavours. The global debt cancellation movement has been campaigning for decades for an international arbitration panel, which would be an international mechanism and body which would, in cases of debt crises or disputes, be in a position to review the debt situation of a country and to weigh up whether its debts are legitimate or should be repaid. International financial institutions have not pursued this proposal, which we have made on many occasions. This is the reason that at the grass roots level citizens in southern countries are taking up the idea of debt audits. They are doing so in order to access the information for themselves and to decide whether their debts are just and then to pressure their governments to take decisions on their behalf. Debt and Development Coalition Ireland is a member of an Irish network, Debt Justice Action, which seeks to pressure our Government with regard to suspending all of our Anglo Irish Bank debt payments. This is a similar model we have borrowed from citizens in countries of the global south.
The question of China's role was raised and the question was asked whether China is a member of the World Bank. It is a prominent member of the World Bank. Recently, a senior staff member of the World Bank commented to me that senior staff and the executive director sit up and listen when China speaks, because China is a very significant lender to southern countries now. This has posed some new competition to the traditional international lenders, such as the World Bank and the IMF. A good aspect of China's lending is that it does not attach policy conditions, such as the economic policy conditions the World Bank and the IMF pursue. However, the bad aspect of China's lending is that it is often for environmentally problematic projects that do not have social or environmental safeguards attached to them. Also, the lending can often be in the form of tied aid, where Chinese companies and labour are employed, particularly in African states. This is of serious concern to Debt Justice Action activists in countries of the global south.
With regard to energy and climate, Ms Morin referenced the fact that the IFC is ramping up its engagement in clean energy. However, a question arises as to the definition of clean energy. This is a big concern for environmentalists across Africa, Asia and Latin America. On the one hand, the World Bank is not meeting its renewable energy targets and on the other, it continues to invest in dirty energy projects. A prime example of this is the Eskom coal power plant that was approved recently for South Africa, despite concern and opposition from communities that will be environmentally and socially impacted by that project. The good thing about the World Bank Group is that it has an independent evaluation unit and inspection panel. The inspection panel has reviewed the Eskom project and has reflected many of the concerns raised by the communities back to the World Bank. The question now is: What will be done? It appears that, of late, the executive directors at the World Bank have said that these problems should be dealt with by the South African Government.
There is a problem therefore with regard to when the World Bank pursues large scale project lending and does not apply the correct social and environmental safeguards. Once the loan has been approved, it is very rare that the World Bank then changes its operations. This is a serious challenge. The World Bank should be show-casing projects in the renewable energy area where so much can be achieved, whether through solar, wind or other forms of energy. However, instead we have many dirty energy projects that cause great damage to communities in the global south. The political process relevant to this currently within the World Bank is a review of its safeguards policy, which is very weak. It does not provide enough social and environmental protection to communities affected by large scale World Bank projects. Therefore, we call on the World Bank to ensure that the review of the safeguards policy brings the safeguard framework up to standard, in line with international human rights, laws and frameworks. Our concern is that there is now a race to the bottom among lenders, where the World Bank is now competing with China which has very low standards. We are concerned that the World Bank will further dilute its safeguards policy when in fact it needs to be greatly strengthened.
The next question concerned the response of the Irish Government to the policy concerns we raised. Before that, I will deal with the question of concerns about corrupt governments. This is very high on the agenda of debt justice activists living in countries of the global South, because they are engaged in seeking to build more transparent and accountable government. The question for the Irish Government, and perhaps for this committee, is how to ensure that any funds from the Irish Aid programme and the Department of Finance contributions to the World Bank and the IMF are accounted for properly and are provided only in cases in which it is clear the funds will be put to their intended use. In addition, Ireland must work for more responsible financing standards between borrowing and lending countries. This does not mean pursuing policy conditionality but, rather, simplifying the borrowing-lending relationship between financial institutions and countries of the global South so that loans are not used as a political instrument to bring about economic changes within a country but are more straightforward development loans. Our European umbrella group, the European Network on Debt and Development, has formulated a set of template standards that could apply. It is important that Irish Aid ensures that any funds allocated to southern countries are used efficiently and in the correct way, but it is critical that Ireland's development co-operation policy maintains a do-no-harm principle. We must not use our membership of the World Bank and the IMF to achieve things that are beyond the mandate of the institutions or are not in the interests of citizens in the global South. This entails simplifying the lending-borrowing relationship and ensuring it is governed by clear fiduciary standards.
On the final question of the response of the Irish Government to the policy concerns we have raised, public consultation on the White Paper has now closed and we have made our submission to the Minister of State at the Department of Foreign Affairs and Trade, Deputy Costello. We have ongoing dialogue with the constituency in Washington at both the World Bank and the IMF and with Irish Aid and Department of Finance officials, which we greatly welcome and find very useful. The critical concern for Debt and Development Coalition is that while Ireland has a historically positive track record of supporting debt cancellation for southern countries, our policy is now completely out of date at a time when debt cancellation schemes are coming to a close, and there is no clarity with regard to the Government's view on the continuing debt distress levels of southern countries. Neither is there clarity about its view of the impact on the ground of World Bank and IMF policy conditions, or its view on odious or illegitimate debts that continue to be repaid by countries of the global South. These are policy matters; they will not cost Ireland significant amounts of money, but they demand leadership from the Irish Government to pursue the principles of partnership with southern countries and encouraging locally-owned development strategies so that southern countries can decide their own routes out of poverty. These policy questions have not been addressed and therefore these principles, which are a cornerstone of the White Paper on Irish Aid, are being undermined.
I hope I have answered the questions. I would be happy to respond to any further questions.
